I’m the Washington D.C. bureau chief for Forbes and have worked in the bureau for more than two decades. I've spent much of that time reporting about taxes -- tax policy, tax planning, tax shelters and tax evasion. These days, I also edit the personal finance coverage in Forbes magazine and coordinate outside tax, retirement and personal finance contributors to Forbes.com. You can email me at jnovack@forbes.com and follow me on Twitter @janetnovack.

Paul Ryan's Deficit Cutting Plan And Your Delayed Retirement

There are many headlines in the 10-year deficit slashing plan formally unveiled today by Rep. Paul Ryan, the Wisconsin Republican who chairs the House Budget Committee. Some $6 trillion in spending cuts over the next decade. No added tax revenues, with any reduction in tax expenditures (meaning tax deductions, credits and exclusions) used to fund a reduction in the top individual and corporate tax rates from the current 35% to just 25%. (And until reform comes, a continuation of the Bush tax cuts now scheduled to expire at the end of 2012.) Drastic cuts in domestic discretionary spending—a roll back to 2008 levels, followed by a five year spending freeze. Net result: A $4.4 trillion 10-year cut in deficits compared to President Barack Obama’s 2012 budget proposal.

So what about retirement and entitlements? Old folks vote and Ryan insisted repeatedly on Tuesday that his proposal would protect those who have already “organized their lives around” current programs for seniors. On Social Security, he punted back in the direction of President Obama (who, of course, has himself punted.) Ryan proposed no specific Social Security cuts, he explained today at the American Enterprise Institute, because coming out with specifics “would make it too easy for the Democrats to attack” and “there’s a shot at some bipartisan agreement.” Instead, he called for a trigger mechanism. According to the 73-page document here describing Ryan’s Fiscal 2012 budget resolution and 10 year plan, in the event that the Social Security program is found to be “not sustainable, the President, in conjunction with the Board of Trustees, must submit a plan for restoring balance to the fund. The budget then requires congressional leaders in both the U.S. House of Representatives and U.S. Senate to put forward their best ideas as well.”

As for health care, Ryan said, he sees no chance for bipartisan agreement there. “We’re worlds apart. We don’t want government in health care,’’ he said. “Either health care is going to be run by 30,000 bureaucrats in Washington,” he added, “or 300 million Americans acting as consumers.”

So Ryan’s budget would repeal the Democrats’ 2010 health care overhaul and expansion and would turn Medicaid (the health program that covers the poor, the working poor, a lot of kids and nursing home care for impoverished, once middle-class elderly) into a block grant for states and let those states slash away.

What about Medicare, the popular government run health plan for elderly? Ryan would privatize and means-test the program for those born in 1956 [in 1957] or later by turning it into a “premium support” or voucher (a word he now eschews) plan. According to Ryan’s budget plan, seniors would pick their coverage “in a tightly regulated exchange for Medicare plans” and would get subsidies for their premium costs, with better off seniors getting smaller subsidies. (Ironically, kind of like the insurance exchanges and income based subsidies in President Obama’s to-be-repealed health reform plan.) Moreover, growth in the overall cost of these subsidies would be capped, presumably leaving seniors to pay more and more of their own insurance premiums over time.

Yet another little understood aspect of Ryan’s plan could also affect many Americans’ retirement and late career plans. Ryan would raise the age of eligibility for Medicare. Under current law, Americans now qualify for “full” Social Security retirement benefits at 66 (up from 65 originally), with that age rising two months per year for those born in 1955 or later and hitting 67 for those born in 196o. Yet Medicare eligibility begins at 65 no matter when you were born.

This has allowed those in their early and mid-60s to transition to self-employment, part-time employment or even full retirement, knowing most of their health costs would be picked up by the government at 65. They can even take Social Security as early as 62, if they’re ready to accept a reduced check. But as Ryan outlines here, in a plan he developed with former Clinton budget director Alice Rivlin, the age at which Americans would qualify for Medicare would be increased to match the full retirement age beginning for those turning 55 after Jan. 1, 2011. [Update: According to a Congressional Budget Office analysis of Ryan's new proposal, this provision would kick in for those turning 55 after Jan. 1, 2012, as opposed to the Jan. 1, 2011 date given in the Ryan-Rivlin plan last year and would be phased in more slowly, with the the Medicare eligibility age climbing only two months a year until it reaches 67 in 2033.] So under the Ryan plan, folks born in 1956 [1957] would qualify for the new (premium support, privatized) Medicare when they reach 66 years and four six months,[65 and two months] not 65. That would [eventually] make retirement or scaling back before the full retirement age far more difficult.

Before the Democrats’ 2010 health overhaul, studies concluded raising the Medicare age to 67 would leave some 65 and 66-year-old folk uninsured (or uninsurable), give older workers a strong incentive to cling to regular full-time jobs with health insurance and raise costs for employers who provide health insurance. As the Kaiser Family Foundation Program on Medicare pointed out in a report issued last month, raising the Medicare age to 67 with Obama’s health reform in place, would shift costs to seniors and employers, but wouldn’t leave 65 and 66-year-olds uninsured, since they could always buy insurance (with subsidies, if they qualified) on the new insurance exchanges. But Ryan wants to repeal the Obama health reform even as he raises the Medicare eligibility age.

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When did Forbes go and get all of these Lib journalists? Anyone under the age of 50 should assume that we will get absolutely nothing from the government from Social Security, Medicare and Medicaid. And guess what, that’s the greatest gift your government can give you. Plan and save for your own retirement. Count on yourself & your family. The US Government is beyond bankrupt. These juvenile reactions as if something is being “taken away” from you because someone in Washington raises the arbitrary age of a program is ridiculous. We must retrain ourselves to be self-reliant if we are to have any hope of prospering in the coming financial collapse.

There is nothing about Paul Ryan’s proposals for Medicare with which I agree and one point on which I seriously question his sanity. Does he really think that private insurers are going to accept 65 and 66 year olds as individually insured persons?? Remember denial of coverage for “pre-existing conditions”? It still goes on and with any trashing of health care reform, it would thrive unabated, especially for those in the not-eligible-for-Medicare-but-still-older category he suggests is a good thing. These people, most of whom do have pre-existing chronic conditions of one kind or another (arthritis and diabetes as common examples) would be totally uninsurable. Or they would pay many thousands of dollars each month for premiums with poor coverage, excluding those conditions. I have no idea why anyone thinks this would be fine. How many of your friends, age 65 and 66 have no health issues whatsoever, never get ill, and don’t need health insurance?

Carolyn, You make an excellent point. Some of the biggest beneficiaries of health reform are older folks who don’t yet qualify for Medicare. Repeal of health reform and an increase in the Medicare age would be a one-two punch.

Janet – great article – my understanding is that Ryan’s plan for those under 55 would be to provide Medicare vouchers that would be indexed to the rate of inflation. You wrote that the “growth in the overall cost of these subsidies would be capped, presumably leaving seniors to pay more and more of their own insurance premiums over time.” Does he cap the indexed vouchers in a different part of his budget (that I missed)?